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USD/CAD Eyes Larger Recovery Above 1.3160, BoC Next

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Aayush Jindal

Key Highlights

  • The US Dollar declined to 1.3037 and recentlycorrected higher against the Canadian Dollar.
  • USD/CAD traded above a bearish trend line withresistance near 1.3080 on the 4-hours chart.
  • The NFIB Business Optimism Index declined from105.0 to 103.3 in June 2019.
  • The Bank of Canada is likely to keep interestrates at 1.75% in today’s rate decision.

USDCAD Technical Analysis

After a downside break below 1.3200, the US Dollar declined heavily against the Canadian Dollar. The USD/CAD pair even broke the 1.3160 and 1.3100 support levels to move into a bearish zone.

USDCAD Technical Analysis US Dollar Canadian Dollar

Looking at the 4-hours chart, the pair settled below the key1.3160 support plus the 100 simple moving average (red, 4-hours). A newmulti-month low was formed near 1.3037 and the pair recently started an upsidecorrection.

It broke the 1.3050 resistance area and the 23.6% Fibretracement level of the downward move from the 1.3229 high to 1.3037 low. Moreover,the pair traded above a bearish trend line with resistance near 1.3080 on thesame chart.

Finally, the pair surpassed the 1.3100 resistance and testedthe 50% Fib retracement level of the downward move from the 1.3229 high to1.3037 low.

On the upside, there is a strong resistance waiting near the1.3160 level and the 100 simple moving average (red, 4-hours). A convincingclose above 1.3160 and follow through above the 100 SMA could start a largerrecovery towards the 1.3200 and 1.3240 levels.

Conversely, if USD/CAD fails to climb above the 1.3160resistance, it could slide back towards the 1.3080 or 1.3050 support. Anyfurther losses might open the doors for a test of the 1.3000 handle.

Today, there are two important events lined up – BoC Interest rate decision and FOMC meeting minutes. Both are high risk events and are likely to spark swing moves in EUR/USD, GBP/USD, AUD/USD, USD/JPY, gold price, oil price, USD/CAD and NZD/USD.

Economic Releases to Watch Today

  • UK Industrial Production for May 2019 (MoM) -Forecast +1.1%, versus -1.0% previous.
  • UK Manufacturing Production for May 2019 (MoM) -Forecast +2.1%, versus -3.9% previous.
  • UK Trade Balance non-EU for May 2019 - Forecast£-4.7000B, versus £-4.595B previous.
  • BoC Interest Rate Decision – Forecast 1.75%,versus 1.75% previous.
  • FOMC Meeting Minutes.
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